Accounting Chapter 14 Variable costs decrease in total as the number

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Problem 14-1B (continued)

Part 2

Maxwell

Calculation of Manufacturing Cost per BD

Item

Total cost

(at 15,000 units)

Per unit cost *

Variable production costs

Plastic for BDs

$ 1,500

$ 0.10

Wages of assembly workers

Total variable production costs

Machinery depreciation

Total fixed production costs

Part 3

If 10,000 BDs are produced, we would expect the cost of the plastic for the BDs to

Part 4

If 10,000 BDs are produced, we would expect the cost of the factory rent to

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Problem 14–2B (30 minutes)

Costs

Product

Cost

Dir.

Mtls.

Dir.

Labor

Over-

head

Period

Cost

Selling

Gen. &

Admin

Advertising expense

X

Depr. expense-Office equip.

X

Depr. expense-Selling equip.

X

Depr. expense-Factory equip.

X

Factory supervision

X

Factory supplies used (indirect mtls)

X

Factory utilities

X

Direct labor

X

Indirect labor

X

Misc. production costs

X

Office salaries expense

X

Raw materials purchases (direct mtls)

X

Rent expense-Office space

X

Rent expense-Selling space

X

Maint. expense-Factory equip.

X

Sales salaries expense

X

853

Problem 14-3B (75 minutes)

Part 1

BEST BIKES

Schedule of Cost of Goods Manufactured

For Year Ended December 31, 2019

Direct materials

Raw materials inventory, December 31, 2018 ……….

$ 40,375

Raw materials purchases …………………………………….

894,375

Raw materials available for use …………………………..

Less raw materials inventory, December 31, 2019 …

70,430

Direct materials used ………………………………………….

Depreciation expense—Factory equipment ………….

35,400

Factory supervision …………………………………………….

Factory supplies used (indirect materials) ………………….

6,060

Factory utilities …………………………………………………..

37,500

Indirect labor ………………………………………………………

59,000

Miscellaneous production costs ………………………….

8,440

Rent expense—Factory building ………………………….

93,500

Maintenance expense—Factory equipment ………….

30,375

Total factory overhead costs ……………………………….

Total manufacturing costs ……………………………………..

Total cost of work in process …………………………………

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

Problem 14-3B (Continued)

Part 2

BEST BIKES

Income Statement

For Year Ended December 31, 2019

Sales ……………………………………………………………………..

$4,942,625

Cost of goods sold

Finished goods inventory, December 31, 2018………

$ 177,200

Cost of goods manufactured ………………………………..

1,816,995

Goods available for sale ………………………………………

Less finished goods inventory, December 31, 2018 …..

Cost of goods sold ………………………………………………

Gross profit from sales ………………………………………….

Operating expenses

Selling expenses

Advertising expense …………………………………………..

20,250

Depreciation expense—Selling equipment ………….

10,125

Rent expense—Selling space …………………………..

27,000

Sales salaries expense ……………………………………….

295,300

Total selling expenses ……………………………………….

352,675

General and administrative expenses

Depreciation expense—Office equipment ……………

Office salaries expense ………………………………………

70,875

Total general and administrative expenses …………

Total operating expenses …………………………………….

Income taxes expense ……………………………………………

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Problem 14-3B (Concluded)

Part 3

Raw

Materials

Finished

Goods

Cost of raw materials used ………………………………………

$864,320

Cost of goods sold ………………………………………………….

$1,852,445

Beginning inventory ………………………………………………..

Total beginning plus ending inventory ……………………..

Average inventory (Total / 2) ……………………………………

Discussion: The inventory turnover ratio for the raw materials inventory is

higher than the turnover ratio for finished goods. One reason for the

difference could be that source of supply for raw materials is relatively

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Problem 14-4B (40 minutes)

Part 1

Unit and dollar amounts of raw materials inventory in blades

Units

Cost per

unit

Total cost

Beginning inventory 2,500 $20 $50,000

Purchases during the year 45,000 20 900,000

Part 2

Topics of discussion for the memorandum include:

• General description of the JIT inventory system and how it operates.

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Problem 14-5B (40 minutes)

Part 1

MERCHANDISING BUSINESS

TEEMART

Cost of Goods Sold For The Year

Cost of goods sold

Merchandise inventory, beginning ………………………………………..

$100,000

Merchandise purchases ……………………………………………………….

Goods available for sale ……………………………………………………….

Less merchandise inventory, ending …………………………………….

Cost of goods sold ……………………………………………………………….

MANUFACTURING BUSINESS

AIM LABS

Cost of Goods Sold For The Year

Cost of goods sold

Finished goods inventory, beginning …………………………………….

$300,000

Cost of goods manufactured …………………………………………………

Goods available for sale ……………………………………………………….

Less finished goods inventory, ending ………………………………….

Cost of goods sold ……………………………………………………………….

Part 2

MEMORANDUM

TO:

FROM:

DATE:

SUBJECT:

The answers will vary slightly but should include:

• The Merchandise Inventory account on December 31 for TeeMart and the

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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SERIAL PROBLEM — SP 14

Serial Problem, Business Solutions (50 minutes)

1.

Product Costs

Variable

Fixed

Direct

Indirect

1. Monthly flat fee to clean workshop ……..

X

2. Laminate coverings for desktops ………..

X

3. Taxes on assembly workshop …………….

X

5. Wages of desk assembler …………………..

X

6. Electricity for workshop ……………………..

X

2.

Business Solutions

Schedule of Cost of Goods Manufactured

For Month Ended January 31, 2020

Direct materials ………………………………………………………………………….

$2,200

Direct labor ……………………………………………………………………………….

900

Add work in process, December 31, 2019 …………………………..

Total cost of work in process ………………………………………………………

3.

Business Solutions

Partial Income Statement

For Month Ended January 31, 2020

Cost of goods sold

Finished goods inventory, December 31, 2019 ………………..

$ 0

Cost of goods manufactured ………………………………………….

Goods available for sale …………………………..…………………….

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

Company Analysis — AA 14-1

1. From its 2017 10–K report, Apple reports warranty expense (“accruals

for product warranty”) of $4,454 for 2017. (Amount in millions of U.S.

dollars.)

Comparative Analysis — AA 14-2

($ in millions)

1. For Apple, Research and Development Expenses = $11,581 = 5.05%

Sales $229,234

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

Global Analysis — AA 14-3

1. From its 2017 annual report, Samsung reports a warranty expense

2. From its 2017 10–K report, Apple reports warranty expense (“accruals

3. Based on this one year of data, Apple was more accurate in estimating

warranty expense. Apple’s warranty expense was 3.05% higher than its

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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1.

Ethics Challenge — BTN 14-1

1. Raw materials are part of inventory and should be capitalized (set up as

assets). Their costs are subsequently reported as part of cost of goods

2. The challenge is how to handle a request to use one’s accounting skills

in an inappropriate manner. It is important to remember that the

behavior of the managerial accountant is governed by rules of ethical

Communicating in Practice — BTN 14-2

Instructor note: The solution to this project depends on the database and career fields reviewed.

The objective of this Communicating in Practice project is to make

students aware of the earnings potential of different professions—

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Taking It to the Net — BTN 14-3

1. Standards of Ethical Conduct for Management Accountants are posted

These standards (in abbreviated form) are:

2. The four overarching principles are: Honesty, Fairness, Objectivity, and

Responsibility.

3. The IMA suggests first trying to resolve ethical conflicts by applying the

policies of your organization. If this is unsuccessful, contact your

immediate supervisor (unless he or she is involved in the ethical

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Teamwork in Action — BTN 14–4

Part 1

a. Materials used

= Beg. Materials

+ Materials purchased

– End. materials

= $177,500

+ $872,500

– $168,125

= $881,875

d. Total cost of work in process

= Beg. WIP Inv. + Total manufacturing costs (from c)

= $15,875 + $1,915,750

= $1,931,625

Part 2

Requires that the team check answer to part (1e) with instructor before

proceeding to part (3).

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

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Teamwork in Action (Continued)

Part 3

a. Net sales

= Sales – Sales discounts

= $3,275,000 – $57,500

= $3,217,500

d. Total operating expenses

= Advertising expense + Depreciation expense on office equipment +

Depreciation expense on selling equipment + Office salaries expense

+ Rent expense on office space + Rent expense on selling space +

Sales salaries expense

= $19,125 + $8,750 + $10,000 + $100,875 + $21,125 + $25,750 + $286,250

= $471,875

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

Entrepreneurial Decision — BTN 14-5

1. Manufacturing costs for MoringaConnect include (a) direct materials

such as seeds, fertilizer, and water (b) direct labor harvest moringa

leaves, seeds, and oils; direct labor to process leaves into food power

2. Four goals of a total quality management (TQM) process include

reduced waste, better inventory control, fewer defects, and continuous

improvement. MoringaConnect can use TQM to ensure its key raw

Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14

Hitting the Road — BTN 14-6

Instructor note: Student responses will vary depending on the restaurant chosen.

The general framework of a good response includes:

1. The usual activities are

• serving customer at counter

2. Costs associated with each activity include

• Direct and indirect materials – such as meat, bread, pickles, and

other direct and indirect material costs.

3. Answers will vary because classification of fixed or variable depends